Twitter prices IPO below expectations, moves date to Nov. 6

At $20 a share, Twitter would be valued at about $11 billion. That valuation is lower than the $15 billion that some analysts had expected.

At $20 a share, Twitter would be valued at about $11 billion. That valuation is lower than the $15 billion that some analysts had expected. (Richard Drew / Associated Press)

Jessica Guynn

SAN FRANCISCO — Twitter has set the price range of its hotly anticipated initial public offering between $17 and $20 a share, with hopes of raising as much as $1.4 billion.

At $20 a share, Twitter would be valued at about $11 billion. That valuation is lower than the $15 billion that some analysts had expected.

In addition to the pricing range disclosed in a filing with the Securities and Exchange Commission on Thursday, Twitter is accelerating its timetable and is now aiming to price its offering on Nov. 6 and begin trading the following day, a person familiar with the timing said. He spoke on the condition of anonymity because he is not authorized to discuss the matter publicly.

The 6-year-old real-time messaging service is capitalizing on the pop in social media stocks to sell a 13% stake to the public.

But Twitter set its price range well below the most recent prices on the secondary market, where it has been trading between $26 and $28. Twitter issued shares for restricted stock units in August for $20.62.

By pricing the shares more conservatively than in recent private share transactions, Twitter is looking to avoid the mistakes Facebook made, said Wedbush Securities analyst Michael Pachter.

"I think that we can expect the deal to be substantially oversubscribed, given that they are offering relatively few shares and the price appears to be compelling," Pachter said.

Twitter is the highest-profile technology debut since Facebook in May 2012. Facebook's IPO, which was beset by technical glitches and later by sliding share price, has become a case study on how not to take a company public.

Now that Twitter has set the price range, it can begin pitching the deal to investors.

Twitter could hit the road to shop the IPO as soon as Monday. It's during the road show that investors request how many shares they want and at what price.

The company will probably face a tougher crowd than Facebook did. Among the challenges confronting Twitter: whether it can staunch losses and turn a profit and whether it can continue to grow in popularity beyond its 230 million users.

Michael Yoshikami, chief executive of Destination Wealth Management, said that although the valuation is more "reasonable" than many expected, "it's hard to justify that price given current earnings or even their expectation for future earnings."

"If you buy the stock you better be a momentum investor because valuation is not appropriate in terms of the measurement of the current pricing," Yoshikami said.

Twitter more than doubled its third-quarter revenue to $168.6 million, but its net losses widened to $64.6 million.

While Facebook shares are now trading at record levels, investors are still leery after the dismal post-IPO performances of other consumer Internet companies such as Zynga and Groupon.

"I am a little surprised by the timing, they are not taking very long to educate the investment community about their product, and I continue to believe that most investors have minimal understanding of how Twitter works," Pachter said.

Twitter officially filed its IPO documents with the SEC earlier this month. At the time, it used a $1-billion goal as a place holder.

Twitter filed its plans for an IPO confidentially under the JOBS Act in July. It made that filing public in early October.

Twitter will trade under the ticker symbol "TWTR" on the New York Stock Exchange.

Separately, Twitter has hired Vivian Schiller, a veteran of NPR and the New York Times, to a newly created position as head of news partnerships.

Schiller is leaving her current job as chief digital officer for NBC News. At Twitter, she will oversee partnerships with news organizations.

Twitter relies on the news media and other high-profile users to draw attention and users to the real-time messaging service that often acts like a news wire service. Schiller will serve as a liaison to the news industry.